Export led growth: who will lead in the Caribbean?

Thursday 21 March 2013

Pamela Coke Hamilton, Head of Caribbean Export Development Agency

A huge burden is presently placed on the private sector in the Caribbean. In the midst of steady economic decline of many Caribbean countries, governments have turned to the private sector to continue to earn foreign exchange, to keep down prices for goods and services, to maintain and expand employment, and to pay taxes.

It is in this reality that the Caribbean Export Development Agency held a Colloquium that gathered Ministers of the governments of the Bahamas, Barbados and Jamaica with representatives of large and small companies from Jamaica, Trinidad and Tobago, Dominica, St Lucia and Antigua. They were joined by Academics and trade negotiators.

The outcome of two days of practical and realistic discussion reflected: widespread alarm about the Caribbean’s current woeful economic condition; the recognition that growing the economies of the region is absolutely urgent; deepening and widening markets for Caribbean goods and services must be a top priority; the private sector across the region has to raise its profile and its voice; and governments have to engage the private sector as a genuine partner in growing their economies to provide employment and improve the quality of life of people.

I will return next week to the outcomes of the Colloquium. This commentary contains the remarks I made at it on the urgency for action.

No one needs reminding that the Caribbean is facing its most challenging economic times in recent years. Indeed, the parlous state of some economies border on collapse, burdened as they are with high debt, alarming budget shortfalls and disquieting balance of trade deficits.

Some governments are unable to provide the goods and services that their communities require, and they have borrowed their way into calamity. Some are already in the clutch of the International Monetary Fund as a lender of last resort, complete with its iron-hard conditionalities; conditionalities that in Jamaica have impacted severely on domestic creditors who have been required to endure greater sacrifices than foreign creditors.

It is this same private sector who are also being asked to maintain employment, keep down prices, and to maintain and expand exports that would lead to increased economic growth.

Throughout the region, there is a steady break down in the institutions that are vital to the region’s well-being and progress. The consequences are higher unemployment levels, increasing crime, crumbling infrastructure including roads, ports and tourism plants, education - including the University of the West Indies - and restricted access to capital markets, and even then at higher rates of interest.

Altogether this is a troubling scenario that makes the private sector in the Caribbean less competitive in the global market place.

At the same time, in a region where some of its member states produce enough food to feed the entire area several times over, there is food insecurity and a US$4 billion bill for imported food that is unsustainable. In a region where there is no energy security beyond dependence on the generosity of an external government, there is no regional plan to pool regional resources in joint action to develop access to energy that would include oil and gas but also renewable sources of energy.

This is the scenario in which the private sector is expected to lead growth through exports.

It is the private sector, not governments, that exports or achieves export

earnings from services. Yet, except in Trinidad and Tobago, where there is a government-appointed Standing Committee on Trade consisting of private sector and government bodies, the private sector is notably absent from the table of national policy-making and implementation in the region.

In Canada, the United States and the European Union – and now in China and India – governments consult widely and fully with their private sectors who are affected by trade rules and trade agreements. The negotiators for these governments negotiate for their national private sectors to expand and deepen their market penetration, to put them in the best competitive position.

However, this is not happening in the Caribbean where the distance between governments and the private sector is huge and the level of mistrust is high.

Private sector organisations are as much to blame for this damaging state of affairs as are governments. For instance, in which Caribbean country has the private sector said to governments that the fiscal situation is unsustainable, and asked for a plan in which they could play a meaningful role?

And at the regional level, where is the Caribbean-wide private sector organisation that commands the attention of governments by laying-out its own plan for overall economic growth and development?

Two private sector organisations presently stand-out in this otherwise barren field – the first is the Caribbean Hotels Association in collaboration with the Caribbean Tourism Organisation, and the second is the West Indies Rum and Spirits Producers Association. Both organisations are vital to the region’s foreign exchange earnings and to employment, and they, at least, have put forward proposals for the survival of their industries. Regrettably, governments have not reacted rapidly to these serious concerns.

And in any thinking that might be occurring about export led markets, what private sector plans have been made for China which now enjoys a huge balance of trade surplus with the Caribbean?

China is the world’s second largest economy after the United States. It has over a US$3.3 trillion in foreign reserves. What is the Caribbean plan for penetrating the Chinese market with goods and services, apart from the extractive industries that China wants?

In the best of times, there should be in the region a standing structure of regular and meaningful dialogue and consultation between governments and the private sector. In the worst of times – such as the times in which we now live – the urgent necessity for such a standing structure is a vital necessity.

The creation of that structure of government-private sector consultation ought not to be a waiting game. The Caribbean’s economic well-being is teetering at the brink.